Cambridge IGCSE™

0450/11

October/November 2020

1 hour 30 minutes

BUSINESS STUDIES

Paper 1 Short Answer and Data Response

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS

• Answer all questions.

• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.

• Write your name, centre number and candidate number in the boxes at the top of the page.

• Write your answer to each question in the space provided.

• Do not use an erasable pen or correction fluid.

• Do not write on any bar codes.

• You may use a calculator.

INFORMATION

• The total mark for this paper is 80.

• The number of marks for each question or part question is shown in brackets [ ].

This document has 12 pages. Blank pages are indicated.

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SRB is a bank which provides loans to business customers. SRB plans to make 100 managers’jobs redundant from its 80 branches. This would remove one level of hierarchy. This is part of its

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plan to save $1m in costs over the next 2 years. The Managing Director said: ‘SRB is working withthe trade union about this plan. SRB will make more use of delegation.The bank has to respondto increased competition from online banks. SRB could either advertise more or develop newproducts and services.’

Define ‘trade union’.(a)

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Define ‘level of hierarchy’.(b)

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Outline two advantages of SRB using delegation.(c)

Advantage 1:.....................................................................................................................

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Advantage 2:.....................................................................................................................

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Explain two factors SRB should consider when deciding which managers to make redundant.(d)

Factor 1:............................................................................................................................

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Explanation: ......................................................................................................................

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Factor 2:............................................................................................................................

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Do you think that more advertising is a better way for a business to respond to increasedcompetition than introducing new products and services? Justify your answer.

(e)

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YMG is a private limited company. It is the largest manufacturer of soft drinks in country V. YMGproduces 1 billion litres a year using flow production. TheManaging Director wants YMG to expand.

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He said: ‘I plan to increase production to 3 billion litres over the next 5 years. This will allow us tostart selling our products in new markets in other countries. I know import quotas and lack of localknowledge can cause problems but there are ways we can overcome them.’ The Managing Directoralso plans to invest $60m in new technology to improve efficiency.

Define ‘flow production’.(a)

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Identify two methods (other than technology) a business can use to improve efficiency.(b)

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Outline two sources of finance YMG could use for the new technology.(c)

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Explain how each of the following problems might affect YMG when entering new markets inother countries.

(d)

Problem caused by lack of local knowledge: ....................................................................

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Explanation: ......................................................................................................................

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Problem caused by import quotas: ...................................................................................

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Do you think a joint venture is the best way for a business to enter a new market in anothercountry? Justify your answer.

(e)

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Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball andhockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A

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wide range of inventory is important. Elton has been looking at the financial performance of hisbusiness. The profit margin for 2018 was 35%. An extract of the accounts is shown in Table 3.1.

Table 3.1

Revenue and cost information for Elton’s business for 2018 and 2019 ($)

20192018

2500024000Revenue ($)

Y7200Cost of sales ($)

1800016800Gross profit ($)

100008400Expenses ($)

8000XProfit ($)

Define ‘sole trader’.(a)

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Calculate X and Y.(b)

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State four factors that can influence the amount of inventory a business might hold.(c)

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Explain one advantage and one disadvantage to Elton of operating in a niche market.(d)

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Do you think Elton should be pleased with the financial performance of his business? Justifyyour answer using appropriate ratios.

(e)

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KTF makes building materials, including cement and bricks. Last year KTF had sales of $25bn.KTF’s objectives have often changed since it was started 60 years ago. The Managing Director

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wants KTF to expand. KTF is going to take over one of its main competitors. The newly expandedbusiness will have combined sales of $40bn. TheManaging Director said: ‘Many stakeholder groupswill be affected by this decision.’ She knows there are many external factors that affect businessactivity including the business cycle, interest rates and legal controls to protect the environment.

Define ‘business cycle’.(a)

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Identify two reasons why a business might change its objectives.(b)

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Outline one advantage and one disadvantage to KTF of taking over the other business.(c)

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Explain how two external stakeholder groups might be affected by the take over.(d)

Stakeholder group 1:.........................................................................................................

Explanation: ......................................................................................................................

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Stakeholder group 2:.........................................................................................................

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Do you think businesses will be more affected by new legal controls to protect the environmentthan an increase in interest rates? Justify your answer.

(e)

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